A convenient inconvenient truth

So today those fucks at Standard and Poor’s finally decide to find a shred of integrity and issue the phantom of a REAL rating on something. By lowering the outlook of the United States they somehow triggered full inverse homohammers on the US dollar. Incidentally I have yet to find out what would possess people to buy dollars obsessively in light of the fact that the country is, in fact, broke and likely to default. My current theory is that the dollar short is such a crowded trade that it caused a short squeeze today, along with Finland electing a decidedly anti-bailout government leading to worries about the stability of the European system (read: the probability of future bailouts). I do not think that anyone has any doubts that both these areas (United States and Europe) are due for some debt restructuring in the long run, but right now its simply a game of guessing which fiscally irresponsible country can go full retard zimbabwe styles inflation first. I don’t have the answer to that question, but if I had to guess I would say the United States simply because they have turbo Ben at the helm (the Germans and now the Finish are at least somewhat anti-bailout) and a government that is so dysfunctional they will almost cause a shutdown over less than a tenth of a percent of the deficit. This brings me full circle back to those fucks at Standard and Poor’s – they rightfully shit all over both parties plans to reduce the deficit. It is simply inconvenient for me, being largely invested in highly leveraged shit, that these assholes picked today of all days to start telling a semblance of the truth. Remember these are the same people who brought you 10 years of AAA rated MBS and CDO, essentially facilitating the mess we are in today.

The dollar may follow through with a bounce here, which would be bad for the markets and for me. But it is something I have largely resigned myself too. Today all that stemmed the bleeding in my portfolio was that I am largely invested in gold. The action in gold told me that investors simply aren’t buying the US dollar strength – lending support to my short covering theory – as the relationship between the USD and gold was all fucked up today. In the longer run, one of these 2 things has to give, and my money says its not gold.

Finally oil. Oil got hit today, on the news that Saudi Arabia is cutting output because of reduced global demand (incidentally that news was out on friday, but no one cared then). If this induced you to sell your oil holdings you have clearly forgotten 3 key points.

1) The dollar is not making a comeback, it is simply thrashing around as it dies, the printing presses will see to that.

2) OPEC is a cartel, the reason you form cartels is to maximize the profits of the members. Saudi Arabia had to give some reason to slash input other than “we don’t feel we are being paid enough per barrel to keep our population from ripping us to shreds.” After all, they have only been lying about their proven reserves for decades now. Incidentally the rebels in Yemen have rejected any form of negotiation which include the current president. Oh and they have declared a caliphate in one of their provinces – bodes well for middle east stability yes?

3) Massive increases in food prices have made the already most unstable region of the world just that much more exciting, as Nigeria decided it was their turn to begin rioting and killing civilians today over a disputed election. All those rebels hiding in the swamps of the oil producing regions certainly would never think of taking advantage of any sort of instability to push their own claims.

These things, I’m sure you will agree, means oil will in short order be trading below $100. Incidentally, if you believe that, I have a bridge to sell you.

Disclosure: Long Oil, Gold and Refiners.


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